Mississippi Development Authority spokesman Dan Turner said the state contributed a $3.6 million grant to Handy and plans to demand the return of the money. Handy CEO Ken White said he hasn’t heard from the state.

White said Handy plans to give the 463,000-square-foot warehouse back to lender Capital One Financial Corp. in exchange for wiping out its debt on the $20 million building.

Handy, a 1,300-store cooperative, built the warehouse with the aim of expanding eastward. White said the economy tanked after Handy decided to expand. Now the distributor is losing money and needs to pull back to its original warehouse in Houston to save money.

“The expansion was too great and the cost to keep that open far exceeded the growth that was happening in the region,” he told The Associated Press in a Thursday phone interview. The company was also dogged for a time by troubles with its electronic ordering system, but White said those problems had been resolved.

Lauderdale County Board of Supervisors President Joe Norwood said White told him the Meridian warehouse handles only 20 percent of Handy’s business. White said the company has $240 million in yearly revenue.

White praised workers in Meridian when he met with them and local leaders Wednesday to announce the closing.

“Our first concern is the impact this is going to have on the employees of Handy Hardware,” said Wade Jones, president of East Mississippi Business Development Corp. “We’re shocked and highly disappointed by this announcement.”

State and local entities contributed at least $5 million in grants, tax breaks and loans toward the distribution center, opened in 2010 along the interstate on the east side of Meridian.

Beyond the state’s $3.6 million investment was $600,000 that Lauderdale County spent on infrastructure and site preparation and a $360,000 loan from the East Mississippi Electric Power Association. Online county records show exemptions from Meridian and Lauderdale County property taxes could be worth as much as $230,000 a year, or $460,000 for the two years the warehouse has operated. The county tax collector’s office said the state is still processing the exemption and tax breaks would actually be worth a little less.

In exchange for those inducements, Handy agreed to hire 175 people within three years. It never reached that goal.

Jones said he and MDA representatives had already planned to meet Friday in Atlanta with consultants who help companies choose new locations. They’ll now try to pitch the Handy warehouse. Jones said site selection consultants are also coming next week to tour the Meridian area.

“We need to market that building and get someone back in there so we can hire some of our people,” Norwood said.

Capital One is expected to take over loan repayments to the electric cooperative. While the state will seek its money back, the county will not, Norwood said.

Turner said the state has previously recouped money from companies that missed job targets, but couldn’t immediately cite a comprehensive list. Examples named by Turner were the cancelled Alliant Techsystems expansion in Iuka and the stillborn Harbor Walk real estate development in Ridgeland. The state also clawed back $1.65 million of a low-interest loan from Oreck Corp. when the vacuum maker closed its Long Beach plant in 2007.

“We do what we say we’ll do and we hold the companies accountable to their portion,” Turner said.

In a study earlier this year of how well states ensure companies deliver on promises made to get incentives, Mississippi ranked 23rd. Good Jobs First, a Washington, D.C.-based group that’s suspicious of government incentives, found it’s often hard to tell how often companies are found to break agreements or forced to pay something back. Mississippi is among the majority of states that doesn’t routinely publicize repayments.

“One of the problems we have is the poor state of disclosure,” said Philip Mattera, research director for Good Jobs First.